FTI Consulting, Inc. (FCN) – Shares of business advisory firm, FTI Consulting, Inc., plunged 27.1% to touch an intraday and new 52-week low of $31.53 after the company cut its outlook for the year and revealed second-quarter results are likely to disappoint. The stock is currently trading 26.45% lower on the day to stand at $31.83 as of 11:10 am (ET). The consulting company, and provider of forensic accounting in the Madoff Ponzi scheme, said Tuesday it expects to earn $0.50 to $0.55 a share in the second quarter, which is drastically lower than the average earnings of $0.75 a share anticipated by analysts. FTI Consulting also slashed its full year earnings outlook estimated in February from $3.00 to $3.25 a share to its new forecast of $2.50 to $2.80 per share. The firm’s significantly reduced outlook for the year inspired analysts at both Oppenheimer & Co. and William Blair & Co. to cut their ratings on FCN to ‘market perform’ from ‘outperform’ today. Options investors were quick to initiate near-term bearish transactions on the stock. Traders bracing for continued erosion in the price of the underlying stock purchased at least 1,100 puts at the July $30 strike for an average premium of $0.33 per contract. Put buyers at this strike are positioned to profit should shares decline 5.9% from the intraday low of $31.53 to breach the average breakeven point to the downside at $29.67 by July expiration. Other pessimistic players sold 1,000 calls at the July $35 strike to pocket an average premium of $0.68 per contract. Call sellers keep the full premium received on the transaction as long as FCN’s shares fail to trade above $35.00 by expiration day. The overall reading of options implied volatility on the stock shot up 41.6% to 51.47% by 11:25 am (ET).
KB Home (KBH) – Investors are piling into call options on the homebuilding firm this morning with shares of the underlying stock rallying more than 3.65% to $10.77 by 10:55 am (ET). Bullish options traders expecting continued appreciation in the price of KBH’s shares coveted approximately 9,500 calls at the August $12 strike for an average premium of $0.32 per contract. Call buyers make money if, by August expiration day, the homebuilders’ shares jump 14.4% over the current price of $10.77 to surpass the average breakeven point to the upside at $12.32. Frenzied activity in August $12 strike call options sticks out like sore thumb as previously existing call open interest at that strike stands at a meager 729 contracts. As of 11:00 am (ET), it looks like more than 16,800 call options have changed hands at the August $12 strike price.
US Airways Group, Inc. (LCC) – Options investors are building up bullish positions on US Airways Group today with shares of the underlying stock soaring 9.15% higher to $8.82 by 11:30 am (ET). LCC’s shares jumped after the airline reported its passenger revenue per available seat mile surged 22% in June. Traders anticipating US Airways’ shares will continue to rally flocked to the August contract to purchase call options on the stock. Bulls bought approximately 8,600 calls at the August $10 strike for an average premium of $0.44 apiece. Investors profit if LCC’s shares climb 18.4% from the current price of $8.82 to trade above the average breakeven point at $10.44 by August expiration day. It looks some options traders expecting to see LCC’s shares rally sharply during the current session got ahead of the game and started purchasing August $10 strike calls during Tuesday’s session. First-mover advantages of buying the calls yesterday are clear as investors paid an average premium of $0.33 apiece for the same contracts.
CSX Corp. (CSX) – Shares of the provider of rail-based transportation services are up 2.00% to $48.41 as of 11:40 am (ET) inspiring what appears to be a change of heart for one previously bearish options strategist. It looks like the investor booked profits today by unraveling a well-timed debit put spread originally purchased on June 28, 2010, when CSX shares were trading at a volume-weighted average price of $52.83.CSX Corp.’s shares plunged 11.00% from an intraday high of $52.95 on June 28, 2010, to an intraday low of $47.08 during yesterday’s trading session. The investor appears to have established the put spread at exactly the right time, buying the roughly 3,000-lot July $49/$46 debit spread for an average net premium of $0.44 per contract back on June 28. Today the trader unraveled the bearish position, selling-to-close the spread for an average net premium of $1.295 per contract, signaling perhaps the expectation that CSX shares will continue to rebound. Net profits on the closing sale amount to $0.855 per contract.